Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Google Earnings Are All About the Core


Traders should watch for volatility around Google's report.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Google (NASDAQ:GOOG) is on tap to report earnings after the close today, so let's look at how expectations are shaping up.

According to Bloomberg, analysts expect Google to earn $6.43 per share on revenues ex-traffic acquisition costs of $12.25 billion.

Curiously, revenue estimates have been trending down since last quarter, while earnings estimates have trended higher, as you can see in these charts:

Click to enlarge

Click to enlarge

For the fourth quarter reported on January 30, Google beat on revenues but missed on earnings.

However, the core Google ad business grew 22%, which drove a positive reaction, and the stock subsquently rose 8% before topping out on February 26.

Incidentally, that was when the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) started taking a dive, dragging most high-beta names down with it. Google dropped 16%, but the stock has rebounded hard off Tuesday's V-shaped bottom.

The most important thing investors need from Google is a strong performance in the core business.

Motorola, which has been a major financial drag because of heavy operating losses and sharp revenue declines, is coming off the books, so investors will be willing to look past the inevitable bad performance there.

Therefore, if you're looking to trade Google on the headlines numbers, approach with caution. For example, an earnings miss driven by the soon-to-be discontinued Motorola operation could result in a dip before a sharp snapback, assuming the ad business is strong.

On the commentary side, investors' focus should be on the usual topics like mobile ad monetization, YouTube, Android uptake, though the Google's also likely to talk about the Nest acquisition and Google Glass, which are more long-term initiatives.

Overall, with the stock's recent decline, I'd assume a decent amount of caution is built into the stock, which could result in a nice rally if Google at least meets expectations.

Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos